Jeff Clark's Market Minute

Why Stocks Are Headed Higher This Week

The market action at the end of the day Friday stunk.

Stocks had a nice recovery going off of the opening decline. But, sellers stepped up in the final 30 minutes. The S&P ended the session where it started – testing last Thursday’s low at 2632.

The market posted a decline during Thanksgiving week – which happens only about 20% of the time. This proves that seasonal factors – while they’re still the “odds-on” favorites for a bet – don’t always pay off as expected.

Strong selloffs on Friday are usually a bad sign for the following Monday. So, don’t be surprised by a lower opening to kick off this week.

But, I think most traders should look to buy that lower opening.

Recommended Link

Did the SEC Open the Floodgates on a New Investment?

The Securities and Exchange Commission played no small part in opening the floodgates on a new investment

By telling investors to be “open” to this new technology.

Since then, investors have been flocking to it. And now, these investments have created a unique type of income stream.

These aren’t CDs, bonds, real estate, dividend stocks… or anything boring like that.

You can get started with a small stake…

And see as much as $53,660.

Hurry. Closing soon.

Investor sentiment is miserably bearish. The American Association of Individual Investors (AAII) survey shows the largest percentage of bears, and lowest percentage of bulls, all year. The AAII survey is best used as a contrary indicator. Investor sentiment is often most bearish at the lows of the market, and most bullish at the highs.

So, from a contrary viewpoint, the AAII report is bullish.

Consider also the technical conditions are stretched to the downside. (The S&P closed more than 50 points below its 9-day exponential moving average (EMA), and 160 points below its 40-day moving average (MA)).

So, as much as I think the stock market is headed for a rough patch in 2019, the short-term setup looks poised for one heck of a short-term oversold bounce.

Look at this 60-minute chart of the S&P 500…

This chart has morphed into a falling wedge pattern with positive divergence on the MACD and RSI technical indicators. A breakout to the upside of the wedge should produce a short-term rally (three to four days) of at least 50 points – which would line up well with the 50-day moving average line.

Since the S&P 500 is already quite oversold on the daily chart, I really don’t see a lot of downside risk from here.

Don’t get me wrong… Most traders are sitting like birds on a wire. They’re ready to fly away at the first sign of trouble. So, there’s always the potential for a quick flush lower. And to me, the longer-term picture seems to be shifting to bearish.

But, if you ask me where I think the odds favor stocks heading over the next two weeks… I have to say higher.

Investor sentiment is simply far too bearish at this point to justify a large downside move. Seasonal factors – which, admittedly, have been horribly inconsistent this year – are shifting in favor of the bulls. And stock valuations have fallen back into reasonable levels – not cheap, but not expensive either.

So, if we don’t get a bad trade headline over the weekend, then I think stocks are headed higher this week.

Best regards and good trading,

Jeff Clark

Reader Mailbag

In today’s mailbag, one Delta Report subscriber is thankful for Jeff’s Delta Direct blog (subscribers can access it here)…

Happy Thanksgiving, Jeff! Thanks for sharing your knowledge and experience in the markets and providing profitable ideas and recommendations, and continually keeping us updated every day in Delta Direct.

– Ryan

Do you think stocks are headed higher next week? Did you do any trading over the Thanksgiving holiday?

As always, send any other trading questions, suggestions, or stories to [email protected].

Jeff Clark's Market Minute Archives

Jeff’s intuitive feel for short term market swings and his strong protective discipline have allowed me to lock in thousands of dollars in gains where I might otherwise have just ridden the markets up and down .”  -Chris, a reader and “seasoned investment advisor” from Seattle

Jeff -- your picks and analysis have been nothing short of amazing. I have traded the market for many years but I must admit, I have NEVER seen something this good.” - Mike H.

In only 2 weeks of using the service I’ve booked over $10K in profits. Needless to say I’ve paid for my membership.” - Tony J.

I started following Delta Direct about 3 weeks ago… I bought a small investment from one afternoon to the next morning. About 11AM I got out and made 8K in less than 24 hours.” – D. Tilghman